One of the main purposes of accounting is to monitor the business process, this is a must for every industries, include for distribution and trading company . Accounting also used as the internal control, it is a tool to provide a complete information to the management regarding the business activity, financial calculations, and monitor the asset existence and movement, use of material, labor and financial resource based on the determined budgets.
Distribution and trading company are most common businesses in the world. The activity in a trading company is mostly related to buying and selling products, and deliver service to customers, such as buying products and selling them, increase the cost of purchased product to gain profit. The business process seems very simple, but in fact conducting this business is hard and more time is needed, especially related to the accounting task.
In trading business, stock, merchandise, and inventory are considered as assets. These make the trading business has a different accounting needs. Typically, they company also distribute the products in a large quantity and the in and out product volume of their warehouse is very high. Therefore, the purchase, inventory and sales process must be accurately counted.
To have a better understanding of the trading and distribution business cycle, there are 5 points to keep in mind:
- Company Account
A trading company requires more various account than others. Implementing accounting software will be more beneficial since most software provide the required accounts as determined by the accounting standard.
- Inventory Control
Inventory is one of the keys to increasing the company profit and the competitive advantage to competition. To monitor its inventory and cost, the company create monthly inventory report. The aim of this report is to recognize the actual number between the inventory report in the warehouse (physically) to the inventory report made by staff. There are two systems of inventory keeping records:
- Perpetual inventory system: For each sale and purchase transaction, the inventory and cost of goods sold are regularly updated. Any purchases will directly deduct the inventory, where each sale requires two journal entries: one to record the inventory sales values and other to record cost of goods sold.
- Periodic inventory system: the inventory and cost of goods sold irregularly updated. The purchases are recorded in purchase account and sales transaction is recorded using single journal entry. The result, cost of goods sold does not appear during the accounting period. It will be stated by the end of the accounting period using a closing entry.
- The flow of payable – receivable
The expedite payable influence the inventory availability. Suppliers will put their trust to deliver their products when the payable is properly settled. The cash flow is determined by the receivable aging since cash is earned by the customer purchase. The longer the receivable aging, the more difficult for a company to earn cash.
- Cash Flow
The essence of managing a business is cash flow. Properly managed cash flow result in fully maintained business activity, such as business operation, due date receivable-payable, investment, and others. Financial statement, moreover cash flow is necessary to recognize your financial health.
- Company Profit
Profit earned is allocated for business development. Without earning it, the company will run stagnant and lost its capability for competition.
In accordance to the above-mentioned points, a tool is needed to achieve them. Manual records take more effort to make it, and it will reduce your time efficiency. Save your time, energy, and maintain accuracy by implementing accounting software.
Nowadays, accounting software has compatible features for trading and distribution process, such as inventory, payable and receivable, balance sheet and income statement. This software also offers some options, such as the focus on the inventory only, or an integrated system to inventory, sales and purchase transactions, payable – receivable, operational cost and financial statement. Zahir Accounting, one of the outstanding accounting software is your best choice. Further detail visit our official website http://www.zahiraccounting.com/my
